After more than two decades since the introduction of Broad-Based Black Economic Empowerment (B-BBEE), South Africa continues to grapple with the challenge of realizing the desired outcomes aimed at driving meaningful transformation in the local economy.

Despite persistent efforts to institutionalise these policies as a standard business practice, numerous reports and independent studies have highlighted a significant shortfall in the adoption of broad and substantial transformation measures in key sectors such as mining, property, and agriculture. This situation exacerbates the existing levels of inequality and inequity within the country, further widening the socioeconomic divide.

As of the first half of 2023, Stats SA reported an unemployment rate of 32.4% in South Africa, with specific demographic groups such as black individuals, women, and youth remaining marginalised from active participation in the job market, despite constituting the majority of the population.

The pervasive economic inequality in the country, consistently noted by the World Bank, underscores the urgency of addressing these issues through effective B-BBEE policies.

Government’s B-BBEE drive comprises a comprehensive set of policies and sector-specific codes designed to promote increased investment, support, and development opportunities for previously disadvantaged South Africans within the local economy. This framework encompasses overarching codes of good practice for various industries while also tailoring sector-specific regulations to accommodate the unique characteristics of different businesses.

It addresses critical areas in need of transformation, including but not limited to Enterprise and Supplier Development, Ownership, Management and Control, and Skills Development. Businesses' investments, support initiatives, and deliberate actions are rigorously evaluated, contributing to their overall BEE rating on the scorecard.

This assessment applies to both companies listed on the Johannesburg Stock Exchange and privately owned enterprises. The higher the degree of transformation achieved across these diverse tiers, the more compliant businesses become with the prescribed regulations and controls, thereby enhancing their ability to compete and operate within the local economy as per regulatory standards. Failure to comply specifically on Employment Equity targets can result in fines or penalties for non-compliant enterprises.

While some strides have been made, many have raised concerns that there needs to be a shared vision or alignment on what a transformed economy looks like and how to attain it as a collective. Studies have shown that listed companies in the majority of sectors underperformed on the scorecards when compared to their unlisted counterparts.

Pillars, including ownership, management and control, continue to witness a slow pace of transformation. While enterprise and supplier development has made progress, it’s believed that this pillar remains critical to actively achieving the country’s transformation targets.

“Transformation needs to be understood as more than just a legislative factor. Transformation should be considered as a social responsibility imperative for business. However, some consider it a hindrance to business, as another form of regulation and therefore they engage in box-ticking exercises,” says Thapelo Makotanyane, Head of Empowerment and Transformation at Old Mutual Limited.

This is a sentiment that has been echoed by various entities ranging in size, many lamenting the fact that the need for a higher BEE scorecard – by fulfilling multiple aspects of the codes and sectors-specific policies of good practice – inhibits their ability to be competitive within their unique sectors.

Makotanyane also adds that business has often raised concern about the excessiveness in legislation as Employment Equity – a separate set of legislation to meet transformation objectives in the workplace to drive diversity.

The underlying objective of Employment Equity legislation is to prohibit discrimination against an employee, directly or indirectly, in any employment policy or practice.

The act, first introduced in 1998, is also subject to new amendments suggested (and strongly supported by unions) at the beginning of 2023 that have yet to be announced by President Cyril Ramaphosa.

This policy has also faced several challenges in its implementation, with rising criticism from businesses and opposition political parties that it harms smaller employers with a staff complement of 50 or above.

B-BEEE compliance in action

A few considerations to improve compliance by businesses range from streamlining the alignment of these policies and having a central body monitor and control compliance.

Further to this, Makotanyane also adds that entities and governments have to adopt a more practical approach to transformation that goes beyond the scorecards and compliance. “While the policies are not perfect, companies need to adopt a culture of intention and easily attainable outcomes to drive transformation. This is also evidenced by how Old Mutual has driven these objectives as a listed entity and a Level 1 B-BBEE contributor.”

Makotanyane points to the group's ESD program – which aims to create jobs by supporting small businesses, especially black-owned companies, and rise into the mainstream economy, providing adequate training, investment and support.

“The scope of the Old Mutual ESD program is much bigger than the mandate and targets of the B-BBEE codes. As a business, we have typically invested more than the mandated budget in this area”, says Makotanyane about the initiative.

This remains a crucial pillar for growth as identified by the BEE Commission report titled “Determining the Effective Implementation of Enterprise and Supplier Development Funds.”

The commission found significant funds available for Enterprise and Supplier Development (ESD) programmes. However, only 61% of the funds allocated to ESD were implemented, which was a continuing trend over the past five years:

2017: 44%

2018: 60%

2019: 51%

2020: 61%

Despite this slower-than-desired pace of change, the BEE commission has widely commented that South Africa needs to remain committed to using the policies as a tool to drive change within the local economy that businesses should adopt. The commission has also continued to avail itself of ongoing engagement and conversation on how best these policies need to be adopted.

The next wave of the transformation agenda needs to be clarified and will certainly not be an easy one to navigate. However, it remains critical to encourage increased, improved, transparent dialogue for all to ensure that the next 20 years translate into the tangible integration of financial and economic success for all who live in the country that goes beyond the metrics on the scorecard.

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